Cost Allocation at Starbucks

• Values:

• Direct Costs: $120,000,000
• Indirect Costs: $50,000,000
• Allocation Bases: Square Footage, Sales Revenue
• Requirements:

0. Allocate indirect costs using square footage.
1. Allocate indirect costs using sales revenue.
2. Compare the outcomes of the two allocation methods.
3. Discuss the importance of accurate cost allocation in retail operations.